With the current economic environment and continuing high unemployment, more people than ever are opening an online business. To share some insight as to how Covid-19 has transformed the e-commerce market, here is a great Forbes article from Louis Columbus (view article)
Whether you’re a first time e-com-preneur, a brick and mortar store owner contemplating the move online to offset slowing store traffic, or a seasoned e-commerce veteran, this could be the perfect time to take advantage of expanding your online footprint. It’s important though to make sure you take time to research what you will sell, how you will compete, put the right plans in place, and not rush out of pure excitement.
The following tips on research and planning will help to start you down this new journey on the road to success:
1. What do you want to sell?
The first order of business is determining what you will sell. What makes sense and what will people buy? Countless articles of advice will tell you to find something that interests you, and there is certainly truth to this, and for good reason. You have to believe in what you are selling and be excited to wake up everyday to grow your sales. On the other hand, it’s important to select products that people want, and depending on your goals of entrepreneurship this may overshadow your own personal interests and desires. There was a very successful business owner who once said that he loves sliding down a pole like you find in a firehouse, but instead of being a fireman (with all do respect to the very hard working, lifesaving heroes that risk their life every day), he would rather build a successful company and then buy a fireman pole for his mansion and slide down it any time he wants.
Here are a few guidelines you can follow in determining what to sell online:
- It’s ok to include your personal interests, but don’t let this be the dominant factor. If you’re looking to build a lifestyle for you and your family, while you certainly want to be interested and passionate about what you sell, focus on what the market is looking for and solve a problem. Reserve the “fun stuff” for the results of the lifestyle you build
- Research, research, and research some more. But don’t get so bogged down in research that you never get started (don’t get cooked in the squat). Go through product reviews and see what customer feedback and gaps exist in the market, what improvements can be made and where the opportunities are for offering a rock solid alternative.
- While there is nothing wrong with capitalizing on trends if you can time it right, try to avoid starting a business based on them. If it makes sense though, then go for it. Just proceed with caution on your investment, efforts and launch, as trends do come and go (by definition of a trend). The last thing you want is to miss the best part of the trend cycle and get stuck with excess inventory while trying to grow a business (that’s working capital that could have gone into a more lucrative opportunity)
- Like all great businesses, think narrow and don’t start off too broad. Find just that one great product or service, and deliver it better than anyone else. Then upon success, you can expand from there with related goods and services while you continue to establish your brand and your store.
For some help on what type of business might make sense to start, here are ideas from Shopify https://www.shopify.com/blog/online-business-ideas
2. Conduct market research
Before you make a huge investment into your new business venture and products you want to sell, you should do what you can to first test the market. One of the most costly lessons is to be excited about a product, spend all your precious time and money on your new idea, promote your launch, and then after launch first find out that no one is interested in what you have to sell.
There are several options you can take advantage of to validate your ideas before making any sizable investment. Be creative and explore opportunities to gauge customer interest in advance. Obtain customer feedback and ask the tough questions for answers you may not want to hear. It’s ok though, because it is better to get the direct feedback now from those that would potentially buy your product than after you waste your oh so valuable capital. The better aligned you are with satisfying a market need, the faster you will be on your way to achieving success!
A few ways you can obtain customer feedback and test your ideas include:
- Take pre-orders from customers. This allows you to set up your store without having to invest in inventory. Position your store to take pre-orders of what you might sell along with the appropriate lead times. This is a great way to offer a group of product options to customers and see what’s of interest as well as which products may prove to be most popular based on actual demand. If customers are willing to pre-order and wait for you to create or obtain the merchandise, you potentially have something great!
- Leverage Drop shipping. Instead of investing into your own inventory, perhaps you might find it better to partner with a drop ship provider. The advantage here is you may find a significantly lower upfront investment, the responsibility of shipping is on your drop ship partner, and you can test products easily. Just be careful with the drop ship partner you select. If there are quality issues or delays in shipping to your customers, this will have a negative impact on your brand, not theirs. For additional tips on drop shipping, here is a great article from Shopify (view article)
- Start a Crowdfunding Campaign. This will require a little investment of money and a fair amount of your time, however the tradeoff helps you validate customer interest before going full force into your product and store launch. Particularly if it’s a product you will manufacture, you can share your plans with customers before you build it, perhaps with as little as a prototype. Pitch your idea to a community of millions of individuals enthusiastic in helping to support the next great product. Success will include not only validating your idea, but also an avenue for obtaining pre-orders and raising equity free working capital to help fund your plans to manufacture, launch and grow. Equally as positive, if you do not obtain success in this community, it will allow you to rethink your plans before wasting time and money, thus saving you from potential failure. For additional help on crowdsourcing click here
3. Write a business plan and understand your finances
The saying if you fail to plan then you plan to fail is never more true when it comes to starting a business. While often it may appear that online business success happens by accident, rest assured this is not the case. Understanding details about what you will sell, how you will sell it, who you are competing with, what your cash flow and profitability will look like, how you will market and what teams you need, are all part of this essential step for success. If you’re like many entrepreneurs, you may never look at your plan once you launch your business venture, however taking the time to think through how to grow your business and the impact on your cash flow will help bring clarity when you execute (we recommend however you do your best to follow your plan and compare actuals to forecasts). In addition, your plan gives you a model to refer back to, use as a barometer, and adjust as necessary to help you improve how you run your ecommerce store.
Cash is king and understanding the flow of cash helps protect it, and your business. Over time you need to know how your investments will pay off in customer acquisition, revenue, cost of revenue, expenses and profit. While it is great to have an optimistic plan that outlines the potential of your business, it is critical to have clarity of a financial operating plan that is conservative and honest. One technique you can incorporate when bootstrapping, is to inflate expenses and take a conservative position on revenue. By confirming a “worst case” scenario as to how your cash flow will perform, you will have visibility into what is necessary to survive and grow without running into a cash deficit.
In your plan, understand what teams you need and when. While this may require a fair amount of intelligent “best guessing” if this is your first venture, it is still an important exercise. Your team can generally have a significant impact on your financial plans, and will have a tremendous impact on how well you execute. Fortunately certain disciplines can be outsourced, however be mindful if you go this route to only outsource disciplines that are not part of your core brand. If you partner with firms for some work, it can be a great way to conserve costs and leverage specific domain expertise, but make sure to manage the relationship as well as the results as if the partnering firm was on your payroll.
4. Market like you mean it
For your online venture, marketing very well may be where the rubber hits the road to success (or failure). This discipline should not be taken lightly and can often play a key role in your market differentiation as well as your ability to succeed. How do you distinguish your business and get the word out in a vast sea of competing stores? It can be done, but do you know what to do and how to execute? Is this an area of focus you are best equipped to own, or based on your budget and cash flow might it make sense to partner with a firm that has experience growing online sales? Which marketing initiatives will have the biggest impact on your success? Do you need creative help or do you need assistance with execution of a marketing plan and staying on top of return on ad spend (ROAS)? Are you best to sponsor ads or leverage social media?
Here are a few sources you can review to help with proven marketing techniques necessary to grow your online store
- 34 Ways to Promote Your Online Shop Like a Pro
- 7 Things You Should Do To Market Your Online Store in the Real World
- Ecommerce Marketing Essentials: 17 Actionable Tactics to Drive More Sales
5. Get ready to launch (and launch)!
As we wrap up, here are some final and crucial tips to adopt as you get ready to launch your business and start making money!
- Establish a well organized area for which to run your online business. If you are going online as an extension to your physical store, make sure to carve out an area dedicated to your online business. If you’re a first time entrepreneur kicking off this venture from your home, it’s equally important to establish a business zone where you can store your inventory, and efficiently pick, pack and ship.
- Get traction fast by leveraging your personal and social networks. Ask your friends and acquaintances to support your new venture by spreading the word and idealing buying your product. Don’t be shy. Stand at the top of the highest mountain and let everyone know you’re open for business! This can be a great way to start building that oh so important initial momentum.
- Consider offering discounts and promotions, as well as test marketing well targeted ads. Well positioned promotions can be a successful approach to jumpstarting your sales.
- Monitor your marketing results and adjust. Keep a dashboard in excel, track every single dollar you spend on marketing, and compare your marketing initiatives daily to determine which are working and which are not. Pull the plug on the duds quickly and reinvest into marketing that is yielding the best results as well as try new ideas.
- Obtain software to help you run your business. This includes your online store platform, accounting application, email marketing, and automated integration tools to help streamline your operation.
We hope these tips and guidelines help give you more insight into getting your online business started on the right path to success. Remember, you will need to work hard, but also do your best to incorporate the right decisions and work smart to establish a business that is scalable. Have fun growing your store, and may it be the first of several profitable ventures you pursue!